News Overview

EM Corporate Bond Newsletter

August 2025

Monthly report of the fund management

Emerging market corporate bonds achieved an absolute performance of approximately 0.7% in July with spreads narrowing again by around 20 basis points to close below 200 basis points at the end of July. US yields rose by around 15-20 basis points across the yield curve, with longer maturities performing better. 

Note: Past performance is not a reliable indicator of future performance.

 

Macro Overview

Commodity prices developed differently. The strongest movement was seen in the price of copper which closed slightly weaker in London at the end of July but had previously plummeted by around 20% in New York where it was trading significantly higher. Trump had once again backtracked and withdrawn the tariffs he had previously imposed on certain copper products.

Zinc remained unchanged and iron ore was able to offset its June losses. The OPEC+ countries increased production again by over 500,000 barrels per day which is equivalent to neutralizing the previous cut of slightly more than 2 million barrels per day. Brent crude is now trading at 66 US dollars (as of 11.8.2025), roughly in the middle of this year's trading range of 59-74 US dollars.

Unimpressed by this, diesel prices remained close to their annual highs, as stock levels in the US are low and potential new sanctions on buyers of Russian oil (such as India) could tighten supply. It should be added that Europe imports large quantities of diesel from India. The low oil price is therefore not bringing any significant relief at the pumps. 

In the US, inflation figures for June came in slightly higher than expected. The possible effects of the tariffs can already be seen, although they had not yet been finalised at that point, see: Are prices rising because of tariffs? Here’s what we know : NPR

The Federal Reserve (especially chairman Jerome Powell) stuck to its opinion in July with only the two governors close to Trump arguing for an interest rate cut. 

The number of new jobs created in the US has been revised sharply downwards for the last few months which president Donald Trump considered scandalous and responded by dismissing the head of the statistics agency. In principle, there should be a certain degree of stability in the methodology used to compile macro indicators. If a method produces volatile estimates, it should be replaced or revised to avoid even the appearance of politically motivated manipulation. In fact, we saw that towards the end of Joe Biden's term in office, the figures were high and then had to be revised downwards.  The heads of major US banks such as BofA also signaled that there are methods available today that allow for more accurate and reliable estimates. The manner of the dismissal and the comments made about it were, to put it mildly, "suboptimal" and reminiscent of similar incidents in Argentina or Turkey.

Emerging Markets Overview

The Chinese economy held up well in July. Consumer spending, such as gambling, remained stable, enabling casino operators in Macau to report good figures once again. The parameters in the real estate industry also improved slightly but the sector is not yet out of the crisis despite all the measures taken. The US and China are working on a meeting between Donald Trump and Xi Xinping, where several economic measures are to be finalised and signed.

India has been hit with US tariffs totaling 50% to sanction its imports of Russian oil. Trump now seems to be focusing on a ceasefire or de-escalation in the war between Ukraine and Russia, thereby increasing the pressure on Putin. However, India did not bow to this pressure but instead sent a signal of strength by immediately initiating a conference call with Brazil and China. Corporate bonds from India hardly reacted to this news, assuming that the tariffs would probably not remain at this level. Only the currency trended slightly weaker in response to this news. 

Brazil itself is now trying to minimise the high tariffs through talks on an equal footing – tariffs on aircraft parts have already been reduced. Embraer was thus able to offset a large part of its losses on the markets.

According to a report, Colombia is taking out a loan in Swiss francs to buy back local and US dollar-denominated bonds and thus reduce interest expenses. Reforms would yield better results but these are unlikely before the elections. 

The US has sanctioned smaller Mexican financial institutions on suspicion of money laundering in deals with the mafia. This led to nationalisation to maintain financial stability. Risk premiums for large banks such as Banco del Norte and BBVA Mexico remained stable. The Mexican economy has been weakening for several months due to the tariff war. Shopping mall operator El Puerto de Liverpool reported weaker figures, as did BBVA Mexico. 

Note: The companies listed here have been selected as an exmaple and do not constitute an investment recommendation.

Overview of EM Companies

There were numerous results for the second quarter but hardly any notable outliers that led to major price movements in bonds.

Worth mentioning is the airline industry (LatAm Airlines, Aeroméxico, Avianca) which delivered neutral to very good figures. Bond prices rose accordingly. We were overweight in LatAm Airlines, in Aeromexico and invested in or increased our holdings in Avianca after the figures were released. The situation at Avianca was not entirely clear, so we waited for the figures to be released before making a more informed decision. The sector is benefiting from increased demand from tourism and transport and from lower fuel prices. The yields on these securities are quite attractive – Avianca's secured bonds (B rating; 2028) are trading at 10%, Aeroméxico (BB rating) at 8.5% and LatAm Airlines (BB/BBB rating) at 6.5% in USD terms, unhedged. 

Outlook & Performance

In reference to Erich Remarque's famous novel and despite numerous hotbeds of conflict, such as most recently between Thailand and Cambodia, one could also say of emerging markets: "All quiet on the EM front". The market remains technically strong. Investors are hiding from volatility in US bonds in the high-yield segment or less liquid companies. Even "BBB"-rated bonds were in demand, so that the risk premiums between the rating classes have become very narrow in some cases. In this environment, we were able to achieve a market-neutral performance in the fund. 

Note: Please note that investing in securities involves risks as well as opportunities.

Performance opportunities for the funds:

  • Valuation distortions in the market for individual bonds provide opportunities

  • Absolute return levels remain attractive

Performance risks for the funds:

  • Unpredictable US politics (economy, Fed)

  • Ever flatter yield curves (AAA-B) mean low risk compensation 
     

Overview Performance

ERSTE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1W4B7 = Distributing share (A)
AT0000A1W4C5 = Accumulating share (VT)

Retail share classes

AT0000A05HQ5 = Distributing share (A)
AT0000A05HS1 = Accumulating share (VT)

ERSTE BOND EM CORPORATE IG

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1Y9D0 = Distributing share (A)
AT0000A1Y9H1 = Accumulating share (VT)

Retail share classes

AT0000A0WJX7= Distributing share (A)
AT0000A0WJZ2 = Accumulating share (VT)

ERSTE RESPONSIBLE BOND EM CORPORATE

Note: Performance chart since fund launch. Past performance does not allow any reliable conclusions to be drawn about the future performance of the funds. The performance is calculated according to the OeKB method. The performance assumes a full reinvestment of the distribution and takes into account the management fee and any performance-related remuneration. The one-off front-end load that may be incurred upon purchase and any individual transaction-related or ongoing income-reducing costs (e.g. account and custody account fees) are not included in the presentation.

Institutional share classes

AT0000A1PY56 = Distributing share (A)
AT0000A2MKX2 = Accumulating share (VT)

Retail share classes

AT0000A13EF9 = Distributing share (A)
AT0000A13EH5 = Accumulating share (VT)

Overview performance contribution in %

Performance contribution at country level

(relative to the benchmark)

Performance contribution at share level

(relative to the benchmark)

Source: Erste AM; Calculation period July 2025; Contribution to gross excess returns in %, Fund: ERSTE BOND EM CORPORATE, Benchmark: J.P.Morgan CEMBI Broad Diversified Composite Index hedged in EUR; Gross performance data (without deduction of management fee); The companies listed here have been selected as examples and do not constitute an investment recommendation. In the context of active management, the above portfolio positionings may change at any time. 

Fund management

Lead-Manager Péter Varga

...has been a member of the Credits team at Erste Asset Management since 2005. As a Senior Professional Fund Manager, he is responsible for various emerging market corporate bond strategies in the team. He has more than 20 years of investment experience. Before joining the company, Péter Varga was responsible for convertible bond and corporate bond funds and the management of two total return funds at Union Investment (Frankfurt/M.).

Co-Manager Thomas Oposich

...is a senior fund manager in the fixed income division of Erste Asset Management. His current focus is on emerging market corporate bonds. Thomas Oposich has been with the company since 2005 and has many years of experience in bond management. During his career, he has been responsible for a broad range of bond funds consisting of US government, money market and corporate bonds, as well as mortgage-backed securities and euro government bonds.

Co-Manager Agne Loibl

...has been with Erste Asset Management since 2010. As a Senior Fund Manager in the Credits team, she is responsible for emerging market investment grade corporate bonds and the Asian markets. Agne Loibl has extensive experience in the area of credits. She started her career in research at ESMT Customized Solutions in Berlin and moved to Risk Management Securitisations at Erste Bank in 2007. 

Relevant new issues

Overview Erste AM EM corporate strategies

Source: Erste Asset Management; Data as of 30.6.2025

Ratings

For a further analysis, you can view our fund at:

Morning Star Rating:                4 Stars
Morning Star Sust. Globes:     3 Globes
Scope Rating:                           A – 69/100

Contact us

Personal contact with you is particularly important to us.
If you have any questions about our investment solutions, our team will be happy to help you.

E-Mail: institutional@erste-am.com

Risk notes for the mentioned funds

Disclaimer

This document is an advertisement. Please refer to the prospectus of the UCITS or to the Information for Investors pursuant to Art 21 AIFMG of the alternative investment fund and the Key Information Document before making any final investment decisions. All data is sourced from Erste Asset Management GmbH, unless indicated otherwise. Our languages of communication are German and English.

The prospectus for UCITS (including any amendments) is published in accordance with the provisions of the InvFG 2011 in the currently amended version. Information for Investors pursuant to Art 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in connection with the InvFG 2011.

The fund prospectus, Information for Investors pursuant to Art 21 AIFMG, and the Key Information Document can be viewed in their latest versions at the  website www.erste-am.com within the section mandatory publications  or obtained in their latest versions free of charge from the domicile of the management company and the domicile of the custodian bank. The exact date of the most recent publication of the fund prospectus, the languages in which the Key Information Document is available, and any additional locations where the documents can be obtained can be viewed on the website www.erste-am.com. A summary of investor rights is available in German and English on the website www.erste-am.com/investor-rights as well as at the domicile of the management company.

The management company can decide to revoke the arrangements it has made for the distribution of unit certificates abroad, taking into account the regulatory requirements.

Detailed information on the risks potentially associated with the investment can be found in the fund prospectus or Information for investors pursuant to Art 21 AIFMG of the respective fund. If the fund currency is a currency other than the investor's home currency, changes in the corresponding exchange rate may have a positive or negative impact on the value of his investment and the amount of the costs incurred in the fund - converted into his home currency.

Our analyses and conclusions are general in nature and do not take into account the individual needs of our investors in terms of earnings, taxation, and risk appetite. Past performance is not a reliable indicator of the future performance of a fund. Please note that investments in securities entail risks in addition to the opportunities presented here. The value of shares and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your shares. Persons who are interested in purchasing shares in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to Art 21 AIFMG for restrictions on the sale of fund shares to American or Russian citizens. Misprints and errors excepted.

The public sale of shares in the specified fund in Germany was registered with the Federal Financial Supervisory Authority, Bonn, pursuant to the German Kapitalanlagegesetzbuch (KAGB). The issue and redemption of unit certificates and the execution of payments to unit holders has been transferred to the Fund's custodian bank/depositary, Erste Group Bank AG, Am Belvedere 1, 1100 Vienna, Austria. Redemption requests can be submitted by investors to their custodian bank, which will forward them to the Custodian Bank/Depositary of the Fund for execution via the usual banking channels. All payments to investors are also processed via the usual banking clearing channel with the investor's custodian bank.. In Germany, the issue and return prices of shares are published in electronic form on the website www.erste-am.com (and also at www.fundinfo.com). Any other information for Shareholders is published in the Bundesanzeiger, Cologne.

Presentations:

It is expressly noted that presentations shall not be construed as providing investment advice or investment recommendations; presentations simply represent the current market opinion. The presentations are not intended as sales instruments and shall therefore not be construed as an offer to buy or sell financial or investment instruments. The investor shall be solely responsible for any and all decisions that he makes on the basis of this presentation.